Long-term outlook

While record-high cattle prices and moderating feed costs are driving the uptick in short-term optimism, producers are slightly more cautious concerning the long term. BEEF readers were asked, “Compared with last year, what is your current level of optimism regarding the long-term future — five years and beyond — of the U.S. beef industry?”

The majority of all respondents, at 58.2%, say the needle hasn’t moved on their outlook meter, indicating they have about the same level of optimism as last year. 27% are more optimistic and 14.9% are less optimistic (Figure 4).

The 2014 survey results for long-term optimism show a better outlook by readers compared with last year. In 2013, 54% of respondents said their outlook for the long term is about the same, while 25% were more optimistic and 21% were less optimistic.

Of the BEEF readers who are more optimistic in 2014 about the long term, 79.5% anticipate the current supply-demand dynamics will continue, while 62.9% see growing international demand, and 38.6% see better feed and forage conditions. Numbers add up to more than 100% because of multiple responses (Figure 5).

For those who are less optimistic about the industry’s long-term future, 71.6% say government regulations and oversight weigh on their outlook. Increased input costs are a concern for 62.1% of respondents, and concerns about long-term consumer demand were noted by 56.9% of respondents. These numbers add up to more than 100% because of multiple answers.

Management strategies

The BEEF survey also asked how readers are adjusting and adapting their management plans to industry conditions. When asked, “Are you making changes in your management and procurement strategies to reduce input costs?” 81.7% of respondents say yes, and 18.3% say no (Figure 6).

Looking deeper, BEEF then asked which strategies readers use to reduce feed costs. Altering forage management was No. 1, with 57.9% of respondents indicating a change. Putting more pounds on cattle before selling was noted by 34%, and 27.3% are reducing cattle numbers. The latter is nearly identical to the percentage of respondents who indicate they’re still dealing with drought (Figure 7).

In addition, some readers are changing their market timing, with 16% planning to market cattle sooner than last year and 9.3% later than usual. However, 44.7% will market cattle the same time as always, while 30% haven’t yet decided (Figure 8).

The survey results also indicate a changing mindset toward value-added marketing. For 2014, when asked if they sold any cattle in the last 12 months that were eligible for a value-added marketing program, 39.4% of respondents say yes, and 60.6% say no. That compares with the 2013 survey, when 45.8% of respondents sold value-added-eligible cattle and 54.2% did not (Figure 9).

Slightly lower numbers were also noted when readers were asked if they received a premium for their cattle relative to the nearby market. In 2014, 73.8% of respondents say yes, and 26.2% say no. Last year, 75.1% of respondents sold for a premium, while 24.9% did not.

In a volatile and changing market environment, using financial analysis to track operational health becomes important. The majority of respondents, 66.5%, say they use net profit/cow to track financial results; 31.8% use value of gain; 30.5% use cow breakeven; 22.8% use return on assets/head; and 22.8% use return on equity/head. Numbers add up to more than 100% because of multiple responses, indicating many respondents use more than one method (Figure 10).